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A man passes by an electronic screen displaying Japan's Nikkei share average. Picture: REUTERS/ISSEI KATO
A man passes by an electronic screen displaying Japan's Nikkei share average. Picture: REUTERS/ISSEI KATO

Singapore — Asian shares struggled to advance on Tuesday, with slightly warmer-than-expected Japanese inflation putting investors on guard ahead of price data due in Europe and the US this week.

The yen steadied at ¥150.57 to the dollar and inched off a three-month low on the euro as Japanese inflation stayed at the central bank’s 2% year-on-year target, keeping alive expectations it would exit negative rates by April.

Tokyo’s Nikkei crept 0.4% higher to eke a fresh record high. MSCI’s broadest index of Asia-Pacific shares outside Japan was flat, keeping beneath last week’s seven-month peak.

Wall Street indices fell overnight and S&P 500 and Nasdaq futures nudged 0.1% lower in morning trade.

The Federal Reserve’s favoured measure of inflation — the core personal consumption expenditures (PCE) price index — is due on Thursday and forecasts are for a rise of 0.4%.

“If as expected, the core month-on-month reading would be the highest since last February and fit with the patience message from the Fed,” said analysts at ANZ Bank.

Rate jitters and enormous auctions — $127bn on Tuesday and another $42 billion on Wednesday — left treasuries under pressure, though yields steadied in the Asia morning.

Ten-year US treasury yields were last two basis points (bps) lower at 4.27%. Two-year yields fell 4bps to 4.70%.

Markets have already pushed out the likely timing of a first Federal Reserve easing from May to June, which is priced at around a 70% probability. Futures imply a little more than three quarter-point cuts in 2024, compared to five at the start of the month.

On the geopolitical front, US President Joe Biden said he hoped to have a ceasefire in the Israel-Hamas conflict in Gaza start by next Monday as the warring parties appeared to close in on a deal.

Brent crude futures kept to recent ranges, rising 0.2%, or 16c, to $82.69 a barrel.

Figures on inflation in the EU are also due this week, on Friday, with the core gauge again seen slowing to the lowest since early 2022 at 2.9% and bringing nearer the day when the European Central Bank (ECB) might ease policy.

Markets are almost fully priced for a first cut in June, with April seen as a 36% chance. In speeches on Monday, ECB president Christine Lagarde and Bank of Greece governor Yannis Stournaras again pointed to a reticence to rush in to cuts .

Bank of England deputy Dave Ramsden and Riksbank governor Erik Thedeen appear later on Tuesday while a smattering of mostly second-tier US and European data is due including consumer confidence for Germany, France and the US

Trade was subdued in early Asian hours, with recent pressure on the Australian and New Zealand dollars extending. The Aussie fell 0.1% to a one-week low of $0.6530, squeezed by a tumble in iron ore prices.

The kiwi was down 0.3% and also at a week low as traders trimmed wagers that New Zealand’s central bank might even hike interest rates when it meets on Wednesday.

“With 9bps priced, we see modest [New Zealand dollar] weakness on the announcement,” said NatWest Markets currency strategist Antony George.

The euro held steady at $1.0848 and sterling inched down to $1.2676. Bitcoin rose sharply overnight on news that software firm MicroStrategy added to its holdings. It was steady at $54,777. Gold held at $2,032/oz.

Reuters

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